Glossary

F

Factor Endowments

The theory that differences in factor endowments among countries result in different opportunity costs; countries have comparative advantages in the production of commodities that are intensive in the use of the factors of production with which their endowments are relatively abundant.

Factors of Production

Productive resources; what is required to produce the goods and services that people want; natural resources, human resources, capital goods and entrepreneurship.

Federal Budget

The taxing and spending plan of the national government.

Federal Deposit Insurance Corporation (FDIC)

A federal agency that guarantees depositors’ savings up to $100,000 per account in most commercial banks, savings banks, and savings associations. The FDIC was established by the federal government in 1933 after the bank failures of the Great Depression.

Federal Income Tax

A tax paid by individuals and businesses to the federal
government to fund such services as national defense, human services, and the monitoring and regulation of trade.

Federal Reserve

The central bank of the United States. Also called the Fed. Its main function is controlling the money supply through monetary policy. (See also Monetary policy.)

Federal Reserve Structure

The structure of the Federal Reserve revolves around a Board of Governors. There are seven (7) members on the Board of Governors appointed to one fourteen (14) year term by the President. Two appointees are designated by the President as Chairman and Vice-Chairman and are subsequently confirmed by the Senate to four (4) year terms. Only one person from the twelve (12) Federal Reserve districts is only allowed appointment to the Board.

Finance Charge

The total cost of credit, including interest and transaction fees.

Financial Investments

Financial Markets

Someone who creates or devises a new process, application, machine, or article of application.

Financial Planning

Setting short-, medium- and long-range goals; then collecting and analyzing income and expenditure information to determine how to meet one's goals.

Financial Risk

The chance that an individual, business, or government will not be able to return money invested.

Firms

Economic units that demand productive resources from households and supply goods and services to households and government agencies.

Fiscal Policy

Changes in the expenditures or tax revenues of the federal government, undertaken to promote full employment, price stability and reasonable rates of economic growth.

Fixed Costs (FC)

Costs of production that do not change as a firm's output level changes; costs that must be paid whether the firm produces or not.

Fixed Exchange Rate

An exchange rate that is set and therefore prevented from rising or falling with changes in supply and demand for a nation's currency.

Fixed Expenses

Expenditures that are the same from week to week or month to month, such as mortgage or rent payments and car payments.

Fixed Income

Income that stays the same from week to week or month to month. Usually refers to income from pensions or bonds.

Flexible (Floating) Exchange Rate

An exchange rate that is determined by the international demand for and supply of a nation's money; a rate free to rise or fall (to float).

Foreign Exchange

Foreign Exchange Market

The market where the demand for and supply of foreign currencies determines exchange rates.

Foreign Investment

The purchase of financial and/or physical assets in one county by businesses or people in another county. This term can refer to either foreign direct investment or investment in foreign financial assets, such as stocks.

Fractional Reserve Banking System

A system in which banks are required to hold only a specified fraction of their deposits available for withdrawal by depositors. The rest may be lent out, thus "creating money."

Fraud

Wrongful or criminal deception intended to manipulate a
person for the purpose of gain, usually financial.

Fraud Risk

The chance that an investment has been misrepresented.

Free Trade

The voluntary exchange of goods and services in the absence of trade barriers and restrictions.

Frictional Unemployment

Unemployment caused by the short-term movement of people between jobs and by first-time job seekers entering the labor force; always present in a dynamic economy.

Full Employment

The natural rate of employment; generally considered to be about 93-95 percent of the labor force, allowing for frictional unemployment of 5-7 percent.

Functional Distribution

Essentially, distribution between different groups.

Functional Distribution of Income

The division of an economy's total income into wages and salaries, rent, interest, and profit; shows the breakdown of income received by individuals and businesses based on the type of resources provided to the productive process.

Fundamental Economics

The ability to produce more units of a good or service than some other producer, using the same quantity of resources.

Future Consequences

Costs and/or benefits of a choice that will be paid or gained at a later time.